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London School of Economics and Political Science Hellenic Observatory Research Seminar

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Title: London School of Economics and Political Science Hellenic Observatory Research Seminar


1
London School of Economics and Political
ScienceHellenic Observatory Research Seminar
  • Poverty and Social Policy in Greece Economic
    Modernization, Social Fissures and the
    Contradictions of Corporatism
  • 6 December 2005
  • Elias KikiliasEconomist, M.Sc, Ph.D.Researcher
    at the Institute of Social PolicyNational Center
    for Social Research

2
  • Issues
  • Part I
  • Work and Poverty in Greece, from a household
    perspective.
  • Social policy efficiency in alleviating poverty.
  • Part II
  • Social policy as a bridge. The architecture of
    the bridge in the conservative-corporatist
    welfare regime.
  • Familialism, corporatism and social reproduction
    in Modern Greece.
  • Aspects of modernization The hidden labour
    market mobility.
  • The origins of mobility from bureaucratic
    clientelism to the contemporary agrarian exodus.
  • Social expenditure has been rising but a welfare
    state is lacking.

3
  • 1. Poverty and Work in Greece A Household
    Approach
  • The Choice of Poverty Measure
  • Although a large academic literature on the
    measurement of poverty discusses why the poverty
    rate is a poor summary index of poverty, all the
    same, it remains the most popular statistic. The
    problem gets serious when the poverty rate is
    used to draw policy conclusions or
    recommendations.
  • Example
  • When reductions in the poverty rate are used as
    the criterion for social policy efficiency,
    administrators who want to demonstrate success
    will always be tempted by the option of
    creaming the poverty population. By
    redistributing benefits or services away from the
    very poorest (who are so far below the poverty
    line they are likely to stay poor anyhow) to
    those just below the poverty line (who have the
    greatest chance of being moved over the line)
    administrators can improve the poverty rate, even
    while deepening the deprivation of the worst off
    - which is surely not a socially desirable
    outcome.

4
  • Employing the poverty rate as a measure of social
    policy efficiency, we get a clear answer to the
    question
  • How many individuals are assisted by social
    expenditure in getting over the poverty
    threshold?
  • But it is not sure at all that this is the right
    question.
  • The SST Poverty Intensity Index
  • This presentation - following the work of
    A.K.Sen, A.F.Shorrocks and mainly L.Osberg -
    introduces a measure of poverty intensity which
    is technically preferable to the poverty rate as
    a measure of poverty.
  • The approach is (hopefully) one of simplicity,
    based on the hypothesis that one reason why bad
    measures of poverty continue to be used is
    because excess technique has been a barrier to
    widespread communication.

5
  • The Poverty Intensity index, hereafter SST, can
    be decomposed as
  • SST (Rate) (Gap) (1G(x)), and transforming
    (1) into
  • lnP(yz) ln(Rate) ln(Gap) ln(1G(x)), we
    get
  • (3) ?lnP(yz) ?ln(Rate)?ln(Gap) ?ln(1G(x))
  • That is, the percentage change of poverty
    intensity can be expressed as the sum of the
    percentage change in the Poverty Rate, the
    average poverty gap ratio (among the poor) and
    the Gini index of inequality in the poverty gap
    ratios (among the total population)

6
  • Data and Methods
  • Data are based on the results of the survey on
    European Union Statistics on Income and Living
    Conditions (EU- SILC), carried out in 2003 by
    the National Statistical Service of Greece (ESYE)
    in collaboration with the Institute of Social
    Policy, National Centre for Social Research.
  • Household's total disposable income total net
    monetary income received by the household,
    including all income from work (wages and
    salaries and self- employment earnings), private
    income from investment and property, plus all
    social cash transfers received including old-age
    pensions, net of any taxes and social
    contributions paid.
  • The definition of the poverty risk used is the
    definition of Eurostat the percentage of
    persons, over the total population, with an
    equivalised disposable income below the at risk
    of poverty threshold.
  • The at risk poverty threshold is set at 60 of
    the median of the national equivalised disposable
    income.

7
  • Poverty and Work Individual and Household
    approach
  • In-work poverty implies that holding a job,
    though necessary, is not always sufficient to
    escape poverty.
  • Work and poverty may be approached either by
    focusing on individuals or on households.
  • An individual-based approach of in-work poverty
    focuses on issues such as job quality, low wages,
    precarious employment, inability to find
    full-time work etc.
  • The household perspective is important because
    the household structure and the household work
    intensity affect the risk of the individual in
    being in poverty, beyond its personal and
    occupational characteristics.

8
  • Examples
  • It is rather possible a female spouse holding a
    precarious job (part-time, low remunerated, etc.)
    not to be in poverty risk, if her husband holds a
    full-time average-paid job.
  • Similarly, a young newcomer in the labour market,
    holding a low paid temporary job, may enjoy
    relatively high living standards if he lives with
    his parents.
  • On the other hand, the members of a single-earner
    household may be in poverty risk, even if his job
    is of high quality and well-paid.
  • The household approach allows focusing on the
    determinants of the families labour supply
    decisions.
  • Estimation of poverty indicators is based on the
    notion of equivalised income, which means that
    the sum of household resources are allocated,
    through a certain equivalence scale, to all the
    members of the family. In other words, poverty
    estimations are implicitly founded on a household
    approach.

9
Table 1 At-risk-of-poverty Rates Household
and Individual Approach, Greece, 2003
10
Figure 1 At-risk-of-poverty Rates Household
and Individual Approach, Greece, 2003
11
Table 2 Poverty Intensity Seniors and
Non-Seniors, Greece, 2003
12
 Figure 2a Poverty Intensity Seniors and
Non-Seniors, Greece, 2003
13
Figure 2b Poverty Intensity Seniors and
Non-Seniors, Greece, 2003
14
Table 3 Poverty Intensity and Employment
Intensity in Households, Greece, 2003
15
Figure 3 Poverty Intensity and Employment
Intensity in Households, Greece, 2003
16
  • 2. The Effectiveness of Social Policy
    Expenditure
  • The central theme of this chapter is to what
    extent does welfare expenditure reduce income
    differences?
  • A customary method to assess social policy
    efficiency is to compare poverty rates before and
    after redistribution, the so-called Beckermann
    ratios.
  • To produce the Beckermann ratios we estimate
    three (3) income distributions
  • Market Income, that is income before any
    transfers,
  • Income including pensions, because pensions play
    a major role in social expenditure, and
  • Disposable Income, that is the real income,
    including both pensions and other social
    transfers.
  • The corresponding poverty rates are estimated
    using a single common poverty line based on the
    disposable income distribution, that is the real
    poverty threshold.
  • It is important to note that this method,
    although practical, is no more than a simple
    exercise that should not be considered in
    interpretive terms.

17
  • It is also important to underline another
    implicit assumption comparing pre- and post-
    social expenditure poverty rates (or gaps) to
    measure policy efficiency, could imply - and is
    more than often interpreted in these terms even
    in academic or official documents - that the sole
    objective of social policy is income poverty
    reduction or alleviation. In this sense, it is
    related to the key policy issues of concerning
    the targeting and the allocation of resources.
  • For policy makers, there is much appeal in the
    idea that the existing total of transfers can be
    reallocated to increase their effectiveness in
    combating poverty.

18
  • However, as A. Atkinson has put it, although
    politically fashionable, calls for better
    targeting need to be treated with extreme
    caution, because such recommendations tacitly
    assume that the sole objective of policy is the
    reduction of poverty, whereas a typical social
    protection programme has a multiplicity of
    objectives.
  • In this sense, the constraints on policy choice
    are more complex than a fixed total budget,
    including the availability and reliability of
    information and the competence and adequacy of
    the administration, aspects all too often ignored
    by economists.

19
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20
Figure 5a The Effectiveness of Social
Expenditure, Total Population, Greece, 2003
21
Table 5 The Effectiveness of Social Expenditure,
Seniors and Non-Seniors, Greece, 2003
22
Figure 5b The Effectiveness of Social
Expenditure, Seniors and Non-Seniors, Greece, 2003
23
Table 6 Participation of Pensioners in the
Population of Households, Greece, 2003
24
Table 7 The Effectiveness of Social Expenditure,
Greece, 2003 Employment Intensity in Working-age
Households
25
Figure 7 The Effectiveness of Social
Expenditure, Greece, 2003 Employment Intensity in
Working-age Households
26
Table 9 Requisite Financial Resources for the
Alleviation of the Poverty Gap, Greece, 2003
27
  • Conclusions, so far
  • Poverty risk is greater in non-working age
    households, but ¾ of the poor live in households
    with headlt65 years old, accounting for almost 80
    of the total poverty gap.
  • Among working-age households - and the population
    as a whole - the larger part of the poverty
    volume stems from mixed employment families,
    that is multi-adult but single-earner households.
  • Full employment (multi-adult and multi-earner)
    and workless households (no adult with market
    income), have an equivalent contribution to the
    poverty volume, but an important distinction
    should be highlighted poverty in full
    employment families stems mainly from the number
    of poor persons and to a lesser extent from the
    poverty gap, while the reverse is true for
    workless families.

28
  1. It must be emphasized that (a) poverty reduction
    or alleviation is not the sole objective of
    social policy, and (b) measuring policy
    efficiency with the single criterion of poverty
    rates change, aside from an inadequate could turn
    to be a misleading exercise.
  2. This said, pensions, absorbing the lions share
    of social cash expenditure, are the main
    contributor to the reduction of both pre-fiscal
    poverty rates and poverty depth in Greece. Social
    (cash) benefits are of greater advantage to the
    households closer to the poverty threshold,
    indicating a possible creaming effect.
  3. Although the distribution of pensions is by far
    the major determinant of poverty reduction for
    the non-working age families, the inequality of
    poverty gap is enhanced, indicating the
    particular distortions of the pension system,
    especially for low-income households.

29
  1. Pensions are also the major determinant of
    poverty reduction for the working age families.
    Pensioners comprise 1/3 of members of full- and
    mixed-employment working-age families and 2/3 of
    members of workless households, which surpass the
    poverty threshold after the distribution of
    pensions.
  2. Creaming effects of cash benefits are
    particularly noticeable in full- and
    mixed-employment households.
  3. Eliminating the current poverty gap would require
    financial resources equivalent to 4,2 of
    national disposable income, of which non-working
    age families would absorb 0.9, full-employment
    households 0.8, mixed-employment families 2.0
    and workless households 0.6. This amount, 4,2
    of national income, corresponds to 8.8 of the
    disposable income of the wealthier quartile (25)
    of the population or 50,3 of the total social
    expenditure that benefits this group.

30
  • It would be only a slight exaggeration to
    conclude that anti-poverty policy in Greece is
  • virtually lacking and social policy objectives
    are way off reducing or alleviating poverty,
  • at the same time as modernization processes
    transform rapidly the patterns of social needs,
    the founding principles, standards and practices
    of social policy have remained at a standstill,
    upholding the corporatist-clientelistic character
    of the welfare system.
  • This is the main argument of the next section.
  • To clarify this argument, however, we have to
    leave the magnificent world of economics and
    enter the wonderful world of political economy
    and sociology.

31
  • 3. Modernization Processes and the Contradictions
    of Social Policy in Contemporary Greece
  • Considering Social Policy
  • Social Policy should not be equated to the
    welfare state, that is something other than
    whatever menu of social benefits a state
    happens to offer. (The Romans or the medieval
    guilds and nobility).
  • T.H. Marshall (1950) The post-war welfare state
    implied the recognition of citizens social
    rights and a promise to bridge the divisions of
    class, a rewritten social contract.
  • Underlying the distinction of the state and the
    individual, there is a fundamental relation of
    mutual creation.
  • Consider social policy as a bridge the
    functions of which are twofold to allow both for
    the articulation and the resolution of conflict,
    thereby providing a continuous link between the
    individual and the state.
  • The famous Lockwoods (1964) distinction between
    social integration ( the bridge) and system
    integration.

32
  • The structural design and the architecture of
    this bridge, namely the particular ways in which
    welfare is produced and allocated between state,
    market and family, varies significantly between
    different countries.
  • Welfare Regimes (Esping-Andersen) Modern welfare
    states can be classified in different clusters,
    according to the historical establishment and
    development of their social policies and the
    consequent implications to the broader social
    structure.
  • the liberal welfare regime (Anglo-Saxon world)
  • the social-democratic regime-cluster (Nordic)
  • the conservative-corporatist regime
    (Continental and Southern Europe)
  • Features of the Conservative-Corporatist Welfare
    Regime
  • Sustain traditional society and integrate the
    individual into an organic entity, protected from
    the individualization and competitiveness of the
    market and removed from the logic of class
    opposition.
  • Soon became a dogma of the Catholic Church.
    Corporatism inserted itself easily into
    Catholicisms subsidiarity principle the idea
    that the state should only intervene when the
    familys capacity for mutual protection was
    rendered impossible.

33
  • Whether it is strict hierarchy, corporatism or
    familialism, traditional status relations must
    be retained for the sake of social integration.
  • The unifying principles of corporatism are a
    fraternity based on status identity, obligatory
    and exclusive membership, mutualism and monopoly
    of representation.
  • Carried over into modern capitalism, corporatism
    was typically built around occupational groupings
    (e.g civil servants) seeking to uphold
    traditionally recognised status distinctions and
    used these as the organizational nexus for
    society and economy.
  • The tradition of constructing a myriad of
    status-differentiated social insurance schemes,
    each with its peculiar rules, finances, and
    benefit structure, each tailored to exhibit its
    clienteles relative status position.
  • International corporative leaders Greece with
    almost 250 (around 370 in early 1990s) and Italy
    with more than 120 distinct pension funds

34
  • Familialism and Corporatism in Modern Greece
  • An essential feature in setting up the state in
    modern Greece (early 19th century) was the rapid
    development of an extended institutional system
    with typological modern civic properties.
  • Economy and society, however, was typified by a
    rather atrophic array of modern economic
    relations.
  • State policies are associated to the creation,
    promotion and expansion of a compilation of
    out-of-the-market incomes and rents, allocated
    to a number of specific social groups.
  • This selective economic insurance policy, could
    be conceived as a function of a broader political
    strategy aiming at the selective and systematic
    formation of a wide supporting-class, typical
    in the conservative-corporatist welfare regime.

35
  • Dominant pattern of Social Reproduction
  • Particular modes of condensation between
    enterprise and household in the context of the
    broader family network.
  • Main components
  • a wide-ranging network of small-scale property
  • the domination of the micro-enterprise
  • the self-employment of the head of the family
    (male breadwinner), and
  • the unpaid labour of family members
  • Stylized Facts (2003)
  • 96.1 of enterprises in Greece employ less than
    4 persons (owner included) and 2 employ 5-9
    persons. Micro-enterprises account for 63 of
    total employment, while enterprises with more
    than 50 persons employed account for around 11
    of total employment. Dependent employment
    (employees) in micro-enterprises accounts for
    only 38.7 of total employment.
  • The stability of this type of social formation
    has been founded on the potential of the family
    units to internalise social risks.

36
  • The unprecedented stability of small-scale family
    ownership in Greece, closely related to its
    demographic stability that is powerless to
    confront, was stemming from the capability of the
    over-manned household to channel a considerable
    part of the redundant human force out of the
    family venture.
  • The main responses to market pressures and hence
    the material basis to deal with social shocks
    (crisis absorption capability) has always been
    (a) migration and (b) public employment, but with
    a distinctive feature the prospect for social
    advancement.
  • This absorption capability of social shocks is
    related to the multi-functional attributes of the
    Greek family
  • unit of consumption, reproduction of labour power
    and domestic regulation (typical)
  • promotion of the individuals social mobility
    through an unparalleled family investment to
    education (key)
  • seeking of economic insurance through the
    acquisition of a privately owned dwelling.

37
  • Aspects of modernization The hidden labour
    market mobility.

But this jobless growth picture may be
misleading since
38
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39
  • Dividing the labour market in a primary and a
    secondary segment, according to the educational
    level of the different occupations
  • immigrants join exclusively the secondary labour
    market,
  • almost all Greek men employees flow into the
    primary segment, but
  • half of Greek women employees enter the secondary
    section of the labour market
  • However, the primary labour market, as defined
    above, does not necessarily indicates high
    quality in work (e.g. public sector temporary
    employees).
  • Wages and Poverty
  • Real labour cost proliferated in branches of
    economic activity closely related to the primary
    labour market (public sector enterprises and high
    level services of the private sector), while
  • Labour cost in the secondary sector of the
    economy has been characterized by stagnant or
    declining trends.

40
  • The average annual labour cost of typical primary
    sector industries (energy, financial
    institutions, etc.) is 70 higher than the
    average labour cost for total economy, while the
    same indicator for the typical secondary sector
    activities (construction, trade, hotels,
    restaurants, etc.) is 25 to 35 lower.
  • 52 of poor employees are also low-wagers (37 in
    the EU-15).
  • During the 1990s the poverty risk increased
    considerably for the employed in the secondary
    economic sectors (78 for manufacturing, 33
    for construction, 47 in hotels and
    restaurants), while
  • it declined or remained unchanged in the main
    divisions of the primary sector such as the
    public service, the monopolistic sectors of
    public enterprises, education, health and the
    high level services of the private sector.

41
  • Early 1980s to Late 1990s From Bureaucratic
    Patronage to the Current Agrarian Exodus.
  • A major feature of the aforementioned labour
    market flows, is that urbanization and the rush
    to cities and mostly Athens, is the other side of
    the rapid salarization of employment,
    especially for women.
  • Rural Politics - 1980s
  • Gross product was stagnating, competitiveness was
    rapidly deteriorating, exports were gradually
    shrinking, but incomes were on the rise.
  • Between early 1980s and early 1990s the
    relative poverty risk of households with a farmer
    as a head, decreased from 1.71 to 1.32 (-23) in
    relation to the national average, while the
    contribution of these families to total poverty
    declined from 37.4 to 16.4 (-56).
  • Common Agricultural Policy subsidies and
    especially its implementation generated in effect
    a powerful network of political and economic
    interests including farmers, manufacturers, state
    executives and employees and the governing party
    officers.

42
  • Agricultural cooperatives, were assigned with the
    task to put into operation the so-called social
    policy in support of the small-scale agrarian
    family holding, that is in simple words the
    payment of prices way off their financial
    capabilities, financed through the Agricultural
    Bank backed up by the state warranty.
  • Unsurprisingly, the liabilities of cooperatives
    had been skyrocketed by mid-1980s, as were the
    political gains, since cooperatives were
    transformed in clientelistic centers.
  • This social in-its-essence policy effectively
    minimized the potential social disturbances that
    would otherwise take place in a period with
    stagnant or negative growth rates of the real
    GDP.
  • Transformation of traditional corporatism and
    clientelism to a bureaucratic patronage or a
    bureaucratic clientelism system the party acts
    a collective patron of its adherents who are
    systematically converted to a state clientele
    through a labyrinthine combination of the party
    and the state apparatuses.

43
  • This policy was ideologically legitimized through
    a type of agrarian populism a blend of
    anti-capitalism, anti-imperialism and
    anti-European notions and the demand for a
    permanent protection of the small-scale family
    property.
  • The strategy was not limited either within the
    boundaries of farming sector or to residents of
    the agrarian areas
  • In Greece, residents of urban areas own almost
    55 of the rented agricultural land.
  • High rate of establishment of new micro-firms,
    promoted by subsidies and an incomes and tax
    policy that left intact revenues and windfall
    profits.
  • Employment in the public sector expanded rapidly,
    more than doubling its share between 1970s and
    1980s.

It could well been argued that the major
strategic objective of state policies during the
1980s was to build and establish the clusters of
a new supporting class, the so-called new middle
classes.
44
  • Rural Politics - 1990s
  • External and internal pressures imposed the
    abandonment of the agrarian-friendly policy.
  • Generation of large-scale fissures within the
    respective corporatist networks (e.g. cotton
    farmers).
  • From mid-1980s to mid-1990s employment in
    agriculture declined by 24 and the number of
    holdings dropped by 16.
  • Agrarian exodus was mainly deriving from wives
    and family members ceasing to participate in the
    family farm, their employment in the farm
    declining by 29 and 35 respectively.
  • From mid 1990s to date the share of employment
    in agriculture declined by another 35.
  • In overall terms the share of employment in
    agriculture was over 30 in early 1980s, 23 in
    1990 and 14 in 2004, while the share of the
    female employment from over 45 in early 1980s
    fell to 29 in 1990 and 18 in 2004.
  • The relative poverty risk of households with a
    farmer as a head, increased from 1.32 in 1994 to
    2.15 in 1999 (63), while the contribution of
    these families to total poverty increased from
    16.4 to 20.9 (27).

45
  • Social expenditure is rising but a welfare state
    is lacking.
  • The renowned fragmentation of social policy is
    nothing but an aspect of the particular form
    corporatism and clientelism, which stigmatize the
    entire structure of welfare sectors, both
    pensions and other benefits (unemployment, family
    and children, etc,) generating islands of
    privilege in a sea of insufficient provision.
  • Aspects of the mounting social fissures generated
    by modernization processes and the inability of
    social policy to fill the emerging gaps
  • Demographic ageing.
  • Further delay of family formation and rapid
    decline of fertility
  • Decrease of three and two generations households
    indicating a possible reduction of family
    solidarity especially among the low-income
    clusters.
  • Access to higher education and educational
    inequalities have been aggravating for low-income
    families.
  • The capability of low-income young persons to
    acquire a dwelling has been rapidly
    deteriorating.

46
Vertical and Horizontal Efficiency of Benefits
(other than pensions) Greece, 2003
47
  • The fragmentation of the Greek pension system
  • A sectoral dimension a large number of pension
    funds by sector of employment or occupation.
    Even within funds, there are sharp differences on
    a sectoral basis regarding contributions or
    pension entitlements.
  • A differentiation according to tier of
    protection, that translates to a system with
    three tiers of benefits consisting of a primary
    pension, a supplementary pension, and a
    separation payment. The three tiers are almost
    always in different accounts, in most cases even
    in different institutions.
  • A cohort dimension, where fragmentation occurs
    even within occupational groups and pension
    funds Frequently, grand fathering rules,
    take-overs of providers and other legal changes
    have created a multitude of subdivisions among
    the insured population according to age or length
    of service.

48
  • General Conclusion
  • The processes of economic modernization in Greece
    during the previous 15-20 years resulted in a
    considerable decline of both the marginal and
    the average capability of the Greek family to
    absorb the consequent social shocks.
  • European conventions and broader macroeconomic
    conditions necessitate restrictive fiscal
    policies and low-level public deficits and debts,
    resulting in the declining capability of the
    state to absorb labour. On the other side,
    migration trends have been reversed.
  • In effect, both of the traditional social
    pressure-releasing mechanisms have ceased to play
    their key-role in sustaining a major part of the
    social integration processes.
  • While system restructuring is well under way,
    welfare state should be a key-actor for system
    integration. Nonetheless, although social
    expenditure has been, till recently, on the rise
    and matches or even outruns the European average,
    the founding principles, standards and practices
    of social policy lingers at the rear, upholding
    the corporatist-clientelistic character of the
    welfare system.
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